The FCA reveals its first cohort of FinTech products and services for the regulatory sandbox

This week the FCA announced the first group of participants in its revolutionary regulatory sandbox. The concept has been mirrored by a number of other regulators around the world, so there is sure to be a lot of interest in who has been selected and how the sandbox operates.

Range of products and players

Established players, start-ups as well as collaborations between established players and start-ups have won places in the first cohort of firms testing new products and services in the FCA's innovative regulatory sandbox. The products and services range across the sector including money transfer, insurance, money management tools using APIs, consumer finance, savings, identification and authentication solutions and issuing and managing securities. Robo-advice is a notable omission in the list, perhaps because it's not seen as innovative enough or, more likely that applicants weren't ready to be included this time round.

Several successful applicants will be testing blockchain or distributed ledger technologies – again demonstrating that this technology is at the forefront of Fintech innovation.

The FCA has also selected products being developed by HSBC and Lloyds, dispelling any doubt that the sandbox is aimed solely at innovative products developed by start-ups.

Financial inclusion

Demonstrating its interest in products that support financial inclusion or have a social benefit, the FCA has included in this cohort a number of initiatives aimed at vulnerable customers.

Govcoin, a technology provider, has partnered with the Department for Work and Pensions to determine whether blockchain technology can be used to make emergency payments to a mobile device

Citizens Advice are testing a debt solution comparison tool

Swave are promoting an app designed to encourage small regular savings using a round-up facility

Tramonex an e-money platform based on distributed ledger technology will use “smart contracts” to transfer donations to charities.

The process

The first cohort had to apply by 8 July 2016. Of the 69 applications received from firms, 24 were deemed to meet the sandbox eligibility criteria.

The winners in detail

Consumer finance

Citizens Advice - A semi-automated advice tool which allows debt advisers and clients to compare the key features of available debt solutions.

Nextday Property Limited - An internet-based property company that will provide an interest free loan for a guaranteed amount to customers if they are unable to sell their property within 90 days.

Identification and verification

Tradle - An app and web-based service that creates personal or commercial identity and verifiable documents on a distributed ledger. In partnership with Aviva they will provide a system for automated customer authentication.

Insurance

Blink Innovation Limited - An insurance product with an automated claims process, which allows travellers to instantly book a new ticket on their mobile device in the event of a flight cancellation.

Investment / Securities

Issufy - A web-based software platform that streamlines the overall Initial Public Offering (IPO) distribution process for investors, issuing companies and their advisors.

Nivaura - A platform that uses automation and blockchain for issuance and lifecycle management of private placement securities.

Bud - An online platform and app which allows users to manage their financial products, with personalised insights, on a single dashboard. Bud's marketplace introduces relevant services which users can interact with through API integrations.

HSBC - An app developed in partnership with Pariti Technologies, a FinTech start-up, to help customers better manage their finances.

Payments

Billon - An e-money platform based on distributed ledger technology that facilitates the secure transfer and holding of funds using a phone based app.

Epiphyte - A payments service provider that aims to provide cross-border payments using blockchain technology.

Govcoin Limited - A technology provider that has partnered with the Department for Work and Pensions (DWP) to determine the feasibility of making emergency payments using means other than cash or the Faster Payments Scheme. The payments platform will use blockchain to allow the DWP to credit value to a mobile device to transfer the value directly to a third party.

Lloyds Banking Group - An approach that aims to improve the experience for branch customers which is aligned with the online and over the phone experience.

SETL - A smart-card enabled retail payment system based on their OpenCSD distributed ledger.

Tramonex - An e-money platform based on distributed ledger technology that facilitates the use of “smart contracts” to transfer donations to a charity.

Savings

Oval - An app which helps users to build up savings by putting aside small amounts of money. These savings can then be used to pay off existing loans early. Oval will be working with Oakam, a consumer credit firm, and a number of their customers during the test period.

Swave - A micro savings app that provides an across-account view; enables a round-up service every time a user spends money and calculates an affordable savings amount based on the user’s spending behaviour.

Next steps

Firms in the first cohort will soon be carrying out their testing – the success of the sandbox approach will be measured by how many of these firms are able to move beyond testing into the mainstream.

Firms can apply to be part of the second sandbox cohort between 21 November 2016 and 19 January 2017.